Down to Earth No. 69, May 2006

Biodiesel and the expansion of oil palm plantations

The new demand for biofuels is putting more pressure on community land.

With the largest extent of oil palm plantations in the world, covering an estimated 6,059,441 hectares1, Indonesia wants to replace Malaysia as the world's biggest crude palm oil (CPO) producer. To achieve this, the Indonesian government is relentlessly promoting investment to expand oil palm plantations by 3 million hectares in the next five years2, including the 1.8 million ha mega-project planned for the border area between Indonesia and Malaysia (see DTE 68).

There are different opinions as to how much of the border area is suitable for oil palm. The Department for Public Works states that potential oil palm plantation land in the border districts, plus the districts of Landak and Sekadau amounts to 3,368,363 ha3. However, according to a study by the Oil Palm Research Centre (PPKS), only 180,000 ha is suitable for oil palm development4.

Another reason for the push to increase palm oil production is the fact that oil reserves are being depleted, while demand for fuel continues to grow. This has prompted the search for renewable energy sources as a substitute for oil.

In Indonesia, consumption of diesel oil, both for transport and industry, has increased to the extent that Indonesia can no longer produce enough for domestic needs. In 2003, diesel production stood at 17 million kilolitres (kl), while total consumption reached 26.4 million kl (165 million barrels)5.

Biodiesel is considered one renewable alternative energy source which has environmental advantages over petroleum diesel. However, the claim that biodiesel is 'carbon neutral' is disputed (see box, below).

Vegetable oils can be turned into fuel in three different ways. They can be used pure or mixed with petro-diesel in specially modified engines. They can also be converted to biodiesel by a simple process using alcohol and a strong alkali to make a more volatile mix of fatty acid esters (transesterification). Some waste animal fats can also be turned into biofuels in the same way6.

The vegetable oil fatty acid compounds for manufacturing biodiesel can be extracted from a variety of tropical and temperate plants or plant products including: palm oil, coconut oil, castor oil, kapok seed oil, malapari (Pongamia pinnata/glabra, Derris indica), soya beans, sunflower seeds, rapeseed, sugar cane, nipah palm sap, sorghum, cassava and sweet potato7.

In Indonesia, the plan is to focus on palm and castor oil to make biodiesel. The industry will be a form of downstream development so that the country no longer exports CPO, but instead exports processed oil8.

To achieve this, the government has issued two decrees: Presidential Instruction No. 1/2006 on the provision and use of biofuels as alternative fuel, and Presidential Regulation No. 5/2006 on National Energy Policy.

Both instruments express the intention to develop biodiesel as an alternative, renewable and environmentally friendly energy source, by 2025.

As a follow-up to this, the Department of Industry and Trade has been given the task of building four castor and palm oil biodiesel factories with a capacity of 6,000 tonnes each and with state budget funding of Rp70 billion (around US $8 million). The plan is to locate the palm oil-fed factories close to oil palm plantation areas on Sumatra and Kalimantan, which have the largest plantation areas9.

In September last year, Indonesia's research and technology minister announced that seven companies had been licensed to set up biodiesel plants. He singled out Jambi and Riau as areas to start production, as well as the border area with Malaysia (see DTE 67).

PT Bakrie Rekin Bio-Energi

PT Bakrie Rekin Bio-Energi is planning to build a biodiesel factory with a capacity of 60,000 to 100,000 tonnes per year, and an investment of US$25 million10.

The company is a joint venture between two Indonesian companies: PT Rekayasa Industri (Rekin) (30%) and PT Bakrie Sumatra Plantation Tbk (70%).

This will be Indonesia's first large-scale biodiesel production plant, and is to be located in Jambi province or on Batam island, Sumatra11. Construction will start in 2007, with biodiesel production, for domestic consumption and export, from mid-2008.

Bakrie will act as supplier, with CPO or other feedstock for processing into biodiesel. Rekin will take on the engineering role and construct the factory.

Increasing demand for CPO

Internationally, countries are in the race to increase their use of environmentally friendly fuel in order to implement their commitments under the Kyoto Protocol and to use the Clean Development Mechanism (see box, below). They are also keen to diversify their energy sources in view of the geopolitics of oil and gas supplies from the former Soviet Union, Middle East and Latin America. Biodiesel is being promoted as a means of doing so.

The European Union countries are attempting to fulfil their Kyoto commitment to reduce greenhouse gas emissions through the European Climate Change Programme12. The EU is aiming to increase renewable energy use from 6% to 12% by the end of 2010, and to increase its share of the total electricity supply from 13% to 21%13. To reach these targets, it is hoped that EU countries will provide facilities and subsidies to companies which support the use of renewable energies.

The European Union is also promoting the use of biofuels as an energy source for transport. The EU has set itself a target of increasing the use of biofuels in energy consumption to 5.75% by 2010. The Commission is now pressing member states to fulfil their commitments under the 2003 Biofuels Directive. The agriculture council of 20 Feb 2006 held a first policy debate on the biofuels strategy and the EU's biomass action plan. The advantage of using biofuels like bioethanol (made from sugar) and biodiesel (made from vegetable oils) is that they are cheap and abundant. It is also claimed that they produce lower emissions of greenhouse gases. Another plus for European farmers is that domestic production of biofuels could offer new income and employment opportunities after the reform of the Common Agriculture Policy14.

In Europe, biodiesel is used in Germany, France and Austria in varying concentrations. In Germany, there are more than 1,000 filling stations providing biodiesel15. The first 'biorefinery' is to be built in Emden, Germany, with financing from a Dutch syndicate. The plant is intend to turn 430,000 tonnes of palm oil, probably from Indonesia, into more than 400 million litres of biodiesel16.

Demand for CPO to generate electricity has increased 400,000 tonnes this year in the Netherlands, of which 250,000 tonnes will be imported. The electricity company, BIOX bv, is reportedly planning to build four new generators using palm oil. The company intends to sell this palm oil-based electricity to several EU countries17.

On top of the new demand for biofuel generation, international market demand for CPO has been on the increase in the Netherlands, the US, Singapore and other countries because the price of other vegetable cooking oils, such as sunflower oil, are higher than palm oil. There has also been an increase in processing capacity - especially in the Netherlands - with the development of new processing plants with capacity from 350,000 to 1 million tonnes per year18.

Land for biodiesel

The increasing international demand for biofuels, their promotion as sources of renewable energy which can reduce the greenhouse effect, and the need to maintain the supply of raw materials, is being used as a justification to expand oil palm plantations in Indonesia.

Research carried out by the Indonesian Biodiesel Forum (FBI) states that 15-20 tonnes of fresh fruit bunches of oil palm per hectare produce 0.2 - 0.22 m3 of raw oil, with 0.95 litres of biodiesel produced from one litre of CPO. This means 0.3ha of oil palm plantation would be needed to generate 1,000litres (1kl) of biodiesel19.

In 2009, biodiesel from oil palm is projected to reach 2% of diesel consumption or 0.7 million kl, requiring over 200,000 ha of oil palm plantations20.

Demand is expected to increase to 2025, when the demand for biodiesel is projected to reach 5% of petroleum diesel consumption, equivalent to 4.7 million kl. This will need 1.41 million ha of oil palm plantations21.

This is a huge amount of land. Indigenous peoples are already suffering the negative impacts of oil palm plantations at their current extent. Apart from destroying socio-cultural values, oil palm plantation projects have been associated with gambling and prostitution. Indigenous people have reported that living costs are higher than before palm oil plantations are developed, when they farmed rice and other crops and/or tapped rubber. Oil palm plantation schemes result in loss of land rights as well as increased family expenditure. Cultivating oil palm does not permit traditional intercropping (tumpang sari) methods, as does rubber22.

If 1.41 million hectares of land is needed just for the biodiesel supply, it is worth considering how much more indigenous-owned land will be seized and how much more suffering will result. All so that Indonesia can develop monocultures in order to reduce greenhouse gas emissions caused by industrialised countries and meet their fuel needs.

Currently, the six million plus hectares of land taken up by oil palm plantations in Indonesia, supply the domestic and international market for household products such as soap, toothpaste, margarine and cooking oil.

If the requirements of biodiesel are added on top of this, it is likely that there will not be any tropical forests left in Indonesia in a few years' time outside national parks and other protected areas. Indigenous and/or local communities whose lives depend on the forests will be destroyed because their forests will be planted with monocultures to supply the renewable energy industry.

The question now is: which is more important for humankind - to sustain life and grow food or biodiesel?

NGOs reject biodiesel from palm oil

An alliance of human rights and environmental NGOs are campaigning against European countries' use of fuel made from palm oil at the expense of forest ecosystems. In an April statement entitled 'No to Deforestation Diesel!', over thirty German, Austrian and Swiss groups warn that a palm oil-fuelled biodiesel boom would repeat the pattern of forest destruction caused by the rapid growth of Indonesia's pulp and paper industry.

"In pursuing such policies the EU becomes co-responsible for the destruction of the last rainforests for supposedly 'renewable' fuel"

Claims that palm oil-based biofuel is carbon neutral are naïve, according the groups, because they don't take into account how oil palm plantations are developed. The swamp and peat forests on Sumatra and Borneo are important carbon sinks, but it is just these forests which are being cleared in order to establish oil palm plantations.

The groups argue that a fundamentally different approach to energy consumption is required, rather than merely replacing oil with biofuels. This entails promoting of public transport over private car and air traffic, more energy conservation measures and more energy from renewable sources such as solar and wind power. The groups are calling for strict criteria to be applied to the use of biofuel raw materials including: no conversion of primary forests for plantations, no burning to clear forests for plantations, no human rights violations or police or military operations and no certification schemes. The statement also calls for customary rights and land rights to be respected and full compliance with ratified international agreements relating to indigenous peoples, biodiversity, workers' rights, etc in countries cultivating biofuel crops.

(No to deforestation diesel! joint statement of NGO-alliance, 18/Apr/06, circulated by Watch Indonesia!

What is the Kyoto Protocol?

The Kyoto Protocol is an international treaty, adopted in Kyoto, Japan, on 11 December 1997, by the third Conference of Parties (COP3) to the United Nations Framework Convention on Climate Change.

The Kyoto Protocol obliges developed countries grouped in Annex 1 to reduce greenhouse gas emissions by at least 5% from 1990 levels, between 2008-201223.

The six main greenhouse gases are covered: carbon dioxide (CO2), methane (CH4), nitrogen oxide (N2O), hydrofluorocarbon gases (HFCs), perfluorocarbons (PGCs) and sulphurhexafluoride (SF6)24.

The Kyoto Protocol defines three 'flexibility mechanisms' to lower the overall costs of achieving its emissions targets. These are:

  • Joint Implementation, which provides for cooperation between for Annex I countries to implement projects that reduce emissions;

  • Clean Development Mechanism, which provides for developing countries to assist developed countries reduce greenhouse gas emissions and for the attainment of sustainable development for developing countries;

  • Emissions Trading, which provides for the trading of carbon credits between Annex 1 countries in order to reach their targets25.

The Clean Development Mechanism is the only one that permits collaboration between developed and developing countries. Indonesia has one registered CDM project (a German solar cooker project in Aceh) out of a global total of 17626.

This mechanism is intended to contribute directly to the reduction of greenhouse gas concentrations in the atmosphere and to result in developing countries receiving additional funds as compensation for their assistance. The result is meant to be beneficial for both sides.

However, the CDM has attracted strong criticism from civil society organisations, particularly since 2001, when governments decided to make temporary carbon storage projects (carbon sinks) eligible as a project category in the CDM. This is because the mechanism can be used by polluting companies to avoid their obligations to reduce greenhouse gas emissions, by promoting highly dubious projects in developing countries.

As the Brussels-based NGO, FERN, puts it:

"These sink projects will only ensure temporary storage while justifying additional, permanent carbon emissions from fossil fuels in an industrialised country party to the Kyoto Protocol. Eventually, the carbon stored through terrestrial sinks - trees, other plants, soil (i.e. part of the 'active carbon pool') - will be released again into the atmosphere, thus adding to the already released carbon emission from fossil fuels the sink was meant to permanently offset."27

The Bali-based organisation CDM Watch lists eleven Indonesia projects under preparation, including three in the sinks and sequestration category, all involving Japanese companies28.


1 Sawit Watch data.
2 ANTARA. Biofuel to Drive Indonesian Palm Oil Expansion. 27/Jan/06.
3 A. Hermanto Dardak. Director General, Department of Public Works: Perspektif Penataan Ruang Nasional pada Kawaasn Perbatasan Negara di Kalimantan. Presented Jakarta, 24/Jan/06
4 Director General of Plantations, Kebijakan Pengembangan Kelapa Sawit Kaitannya dengan Pengembangan Kawasan Perbatasan, Jakarta, 24/Jan/06.
5 Pusat Penelitian dan Pengembangan Teknologi Minyak dan Gas Bumi (LEMIGAS - Oil and Gas Research and Technology Development Centre), Jakarta. May 2005
7 Pontianak Post, 15/Sep/05. 8 'Kelapa Sawit Siap Diolah Jadi Energi Alternatif' 6/Oct/05
9 'Akhir 2006 Pemerintah Bangun Empat Pabrik Biodisel'
10 'PT Rekayasa Industri Akan Bangun Pabrik Biodisel'
12 The European Climate Change Programme. EU Action against Climate Change.
13 European Commission Directorate-General for Energy and Transport. How to support renewable electricity in Europe? December 2005.
15 Suara Pembaruan. 20/Jun/05. 'Mengapa tak beralih ke biodisel kelapa?'
16 Pers com Rettet den Regenwald, March 2006.
17 Kompas 13/Jun/05. 'Belanda Memerlukan Satu Juta Ton CPO'.
18 Ibid
19 Tatang H. Soerawidjaja, Bandung, 16/Dec/05, Membangun Industri Biodiesel di Indonesia - Beberapa Skenario dan Persoalan pengembangan yang Perlu dicermati
20 'Kelapa Sawit Siap Diolah Jadi Energi Alternatif'
21 ibid
22 Indigenous peoples oppose oil palm in West Kalimantan. DTE 66
26 CDM website:
27 Flexible mechanisms, three ways to sidestep emission reductions, For updates on the CDM, carbon sinks and other climate change related news, see For a detailed critique of the potential consequences of Northern companies controlling land use in the South to offset greenhouse gas emissions in the North see Democracy or Carbocrazy? Intellectual corruption and the future of the climate debate, a Cornerhouse Briefing by Larry Lohmann (available at:

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